Unnecessary marketing drives up the costs of medicine, drugs, retirement plans, and education.

I first became aware of this wastage as a new professor in Kansas 25 years ago. Andrew Carnegie had set up an efficient retirement plan for professors a century ago. Similar to—but long before—social security, the insurance annuity system for teachers invested both worker and employer contributions and paid out substantial income after retirement. The system was well-managed with a minuscule amount going into management and the overwhelming contributions going toward retirement payout.

Then Kansas let in several competing retirement programs and the teacher annuity set up by Carnegie had to “compete.” That meant marketing with brochures and advertising that came out of the operating budget. Less money is left toward retirement, a clear case of competition not saving money. A system that worked well in the public good now had to waste money convincing its members to adopt their product line. I was now paying money for slick promotional materials to convince me to stay with their product, and all the competitors were doing the same. More money for public relations and marketing firms meant less money for retirement.

Then this marketing-versus-quality issue became very public last month when American public television aired a one-hour documentary “College, Inc.” on their investigative program “Frontline.” The target of their investigation was for-profit schools with many exploiting online learning. Massive computer servers connected temporary adjuncts with their online students. In some cases, for-profit colleges were spending more on marketing than on faculty!

Graduates at one for-profit college nursing program reported that they received diplomas although they had never been inside a hospital. Others found that their degree was seen as worthless by employers. But marketing made the system “work.” In some cases recruiters were paid on a per-head basis for finding new students. One press investigation found recruiters soliciting in homeless shelters. And where students were not eligible for grants, they were convinced to take out loans that they may never be able to pay back.

The popular American comedy show “Saturday Night Live” even ran a skit based on the most important lesson at an online university being how to hide the fact you have an online degree.

This was no laughing matter with legislators and government officials. Huge government funding goes toward both student education grants and loan programs, with the U.S. government recently taking over direct education lending to college students. The annual cost: $20 billion! Congressional hearings are currently underway on the for-profit issue and the U.S.D.E. has posted new proposed rules that should prevent paying recruiters by-the-head. The public has 45 days to comment on the rules, which will be finalized by November 1 and take effect next July. But the for-profits have a powerful Washington lobby and they held off a rule that would have required them to demonstrate that a significant number of their graduates had job placements to offset the heavy student loans the students had to take out for the education. It appears that a “cheap” education is not cheap.

But the issue of marketing remains. Drug companies discovered that advertising that asks “Is glorp right for you? Ask your doctor” sells drugs and makes big money. Marketing also adds to the cost of that drug. Same with hospitals, medical doctors, and education. Part of the high cost of health care is paying for advertising to convince us to use it, and in most cases that advertising is unrelated to any reasoned judgement. Now that we discover that some non-profit “schools” are spending more on marketing than on faculty, it is also reasonable to ask if the public universities should be spending money on marketing. If they are all serving the educational needs of the state, why should they be spending money to compete with each other for students?

The K-12 public schools cannot recruit students from neighboring districts, but the half dozen new
“virtual schools” are doing just that, much to the distress of public school superintendents. Perhaps as the nation focuses on curbing corrupt marketing at the college level, we should consider the wasteful costs of marketing at the local and state level too. If a school is doing what it should be doing, why should there be any need to market itself at all?